MPC member votes to raise interest rates again
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Andrew Sentance, member of the Bank of England’s Monetary Policy Committee, has once again voted to raise interest rates.
Revealed through the minutes from the MPC’s July meeting Sentance wanted to raise rates to 0.75% because of inflation levels of 3.2%, above the Bank’s target of 2%.
It is the second month in a row that Sentance has called for a rate rise.
All other seven members of the Committee, including the governor Mervyn King, voted in favour of maintaining rates at 0.5% for the 16th consecutive month.
The minutes state: “For one member, it was appropriate to start to withdraw some of the exceptional monetary stimulus provided by the easing in policy in late 2008 and 2009.
“Economic conditions had improved over the past twelve months and the inflation outlook had shifted sufficiently to justify beginning to raise interest rates gradually.”
The Committee discussed easing the monetary policy stance to add stimulus but also to harden it to rein in stubborn inflation levels.
But the minutes show that most members believe the weight of evidence continues to indicate that the margin of spare capacity was likely to bring inflation down and temporary factors would wear off.
Readers' comments (7)
Ian Handley | 21 Jul 2010 10:50 am
Does Mr Sentance understand the difference between 'demand pull' inflation and 'cost push' inflation?
As our economy is experiencing the latter due to amongst other things a massive devaluation of sterling, putting interest rates up will only add to the problem. Good job the other members of the MPC are alight to the issues.
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frank O DOnnell | 21 Jul 2010 4:42 pm
This guy is so out of touch with reality perhaps he should be removed from the MPC
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keith | 23 Jul 2010 1:04 am
totally agree with previous comment-totally out of touch with the reality of day to day living
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Ketan Yadav | 23 Jul 2010 10:32 am
Mr Stance doesnt seem to know what the effects of raising rates now would be.
As for borrowing, lenders have already increased margins and rates - just look at the rates available - (bearing in mind BBR is 0.5% - they average 3-4.5%) for new mortgages.
Its okay to allow some inflation to come in, and maintain low interest rates so that we can pull out of the recesssion. Any immediate rises in rates could 'shock' the recovery.
Although savers may disagree, interest rates must stay low for at least another 2-3 years, higher taxes and borrowing costs.
CPI inflation is scarcely a threat right now - and inflation is a lesser devil than deflation - a year ago, the latter was the biggest risk.
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salil chaudhari | 25 Jul 2010 8:09 pm
Can anybody in their right minds seriously think that it is right to raise interest rates now and hence increase interest paid on govt debt especially when the govt is committed to reducing expenditure by £40bn.
Does Mr sentance want a double dip?
This will definitely kill of any hope of even very modest economic growth as the increase in purchasing power enjoyed by borrowers on low interest rates is further eroded.
Maybe fellow MPC menbers can give Mr Sentance a lesson in basic economics and finance.
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holly | 9 Aug 2010 9:31 pm
Can anybody in their right minds seriously think that it is right to raise interest rates?...yes me,im desperate for an increase in rates.After years of saving and paying off my loans,while others spent their cash,i think its about time i enjoyed the years of saving and let the fools who borrowed and spent to excess suffer instead of enjoying low mortgage rates which will only encourage more spending and debt..........come on mervo push em up up up!!
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